Annual General Meeting 2018 Royal Dutch Shell plc May 22, 2018 - - PowerPoint PPT Presentation

Royal Dutch Shell May 22, 2018

Royal Dutch Shell plc May 22, 2018

Annual General Meeting

2018

#makethefuture

Royal Dutch Shell May 22, 2018

Chad Holliday Chair

Royal Dutch Shell

Royal Dutch Shell May 22, 2018 3

Definitions & cautionary note

This presentation contains data and analysis from Shell’s new Sky Scenario. Unlike Shell’s previously published Mountains and Oceans exploratory scenarios, the Sky Scenario is targeted through the assumption that society reaches the Paris Agreement’s goal of holding global average temperatures to well below 2°C. Unlike Shell’s Mountains and Oceans scenarios which unfolded in an open-ended way based upon plausible assumptions and quantifications, the Sky Scenario was specifically designed to reach the Paris Agreement’s goal in a technically possible manner. These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives’ perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Additionally, it is important to note that Shell’s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA’s 450 scenario (World Energy Outlook 2016), it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years. Although we have no immediate plans to move to a net-zero emissions portfolio, in November of 2017, we announced our ambition to reduce our net carbon footprint in accordance with society’s implementation of the Paris Agreement’s goal of holding global average temperature to well below 2°C above pre-industrial levels. Accordingly, assuming society aligns itself with the Paris Agreement’s goals, we aim to reduce our Net Carbon Footprint, which includes not only our direct and indirect carbon emissions, associated with producing the energy products which we sell, but also our customers’ emissions from their use of the energy products that we sell, by around 20% in 2035 and by around 50% in 2050. Also, in this presentation we may refer to “Shell’s Net Carbon Footprint”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology “Shell’s Net Carbon Footprint” is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. Clean CCS ROACE (Return on Average Capital Employed) is defined as defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which on an accruals basis. Divestments comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in “Cash flow from investing activities (CFFI)”, adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.). Operating expenses is the sum of Production and manufacturing expenses; Selling, distribution and administrative expenses and Research and development. Underlying operating expenses is defined as operating expenses excluding identified items. Free Cash Flow is the net sum of cash flow from operating activities (CFFO) and cash flow from investing activities (CFFI). Organic Free Cash Flow is defined as Free Cash Flow excluding inorganic capital expenditure and divestment proceeds. This presentation contains the following forward-looking Non-GAAP measures: Organic Free Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings attributable to shareholders excluding identified items, clean CCS ROACE, Capital Employed and

• Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most

comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures consistent with the company accounting policies and the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc’s financial statements. The financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell’s strategic themes. Shell’s segment reporting under IFRS 8 remains Integrated Gas, Upstream, Downstream and Corporate. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements

• ver which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is

used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking

• statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward

looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, May 22, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any

• bligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements

contained in this presentation. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov

Royal Dutch Shell May 22, 2018

“You can be sure

• f Shell”

4

Royal Dutch Shell May 22, 2018

Strategic ambition

Thrive in the energy transition World-class investment case Strong license to operate

2017

 Vision embedded in CEO individual performance targets  Support for the Paris agreement, reporting aligned to TCFD  Net Carbon Footprint ambition  Year of transformation  Strong financial delivery + strengthened financial framework  Growth momentum  Shell General Business Principles  Core values: honesty, integrity and respect  Protecting our reputation and driving competitive advantage

5

Royal Dutch Shell May 22, 2018

“You can be sure

• f Shell”

6

Royal Dutch Shell May 22, 2018

Ben van Beurden Chief Executive Officer

Royal Dutch Shell

Royal Dutch Shell May 22, 2018

2017

 Year of transformation  Strong financial delivery + strengthened financial framework  Growth momentum

8

Summary

Thrive in the energy transition World-class investment case Strong license to operate

Royal Dutch Shell May 22, 2018 9

Status Q1 2018

Significant changes delivered since early ‘16

1: 4-quarters rolling Q1 2018; 2: ROACE on CCS basis, excluding identified items; 3: Divestments: headline

BG Acquisition

Completed and fully integrated

~$28 billion

Free cash flow1 at $57 per barrel

~$26 billion

Divestments completed3

~$8 billion

Free cash flow1 and

~15% ROACE2 in Downstream

Royal Dutch Shell May 22, 2018 10

World-class investment case

Cash flow priorities

*subject to further progress with debt reduction and oil price conditions

Priorities for cash

Debt reduction Dividends Buybacks & capital investment

1 2 3

 Continue to reduce

gearing to 20%

 Cancel scrip dividend  Buy back shares

Progress towards a world-class investment case Increase shareholder distributions At least $25 billion* buyback over 2018-2020

Royal Dutch Shell May 22, 2018 11

Strong cash momentum continues

Working capital movements in 2014, 2015, 2016 and 2017 (respectively): $6.405, $5.521, $(6.289) and $(3.158) (in million)

$ billion

Cash flow from operations excluding working capital movements

Cash flow from operations excluding working capital movements 99 52 44 54 +60%; +$14.5 billion Average Brent oil price ($/bbl)

#

$39

2017 CFFO excl. working capital movements (billion)

Royal Dutch Shell May 22, 2018

80% 85% 90% 95% 100% 105% 110% 115% 1/1/17 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr RDS-A RDS-B

Dividend + share price record

Note: RDS-A, RDS-B quoted in GBP on London Stock Exchange, closing price at month end. Source: Bloomberg.

$ billion

Dividend declared

1/1/2017 = 100%

Share price - 2017 till now

4 8 12 16 2010 2011 2012 2013 2014 2015 2016 2017 Shell 10,31 10,45 10,80 11,34 11,88 11,92 15,17 15,52

12

Royal Dutch Shell May 22, 2018

HSSE performance

Injuries – TRCF/million working hours

Goal Zero on safety

Million tonnes CO2e

Upstream flaring

Volume in thousand tonnes

Operational spills

Number of incidents

Process safety

million working hours Number of spills 200 400 600 800 2 4 2007 2009 2011 2013 2015 2017 250 500 5 10 2007 2009 2011 2013 2015 2017 5 10 15 2007 2009 2011 2013 2015 2017 200 400 2013 2014 2015 2016 2017 Working hours TRCF Volume Number Tier 1 incidents Tier 2 incidents

13

 HSSE priority  Performance and

transparency

Royal Dutch Shell May 22, 2018

2017 2018/19

NAM

A 50:50 Joint Venture with Shell and ExxonMobil

August 5 years since Huizinge earthquake (force 3.6) April Production cut by 10% to 21.6bcm March “NAM at a distance” November Raad van State announces judgment appeals against Ministry of Economic Affairs’ amended decision on gas extraction Groningen November NAM submits updated Hazard and Risk Assessment to SodM1 January Earthquake Zeerijp with a force

• f 3.4 on the scale of Richter

January SodM advice to minister

• n gasproduction level. Gas

production locations Loppersum shut down March Damage claims public desk

• pened (‘NAM at a distance’)

14

January Minister Wiebes announces new damage protocol March Ministry of Economic Affairs and Climate Policy announces “Groningen to zero” by 2030

Further information: www.nam.nl, 1 State Supervision of the Mines

Royal Dutch Shell May 22, 2018 15

Thrive in the energy transition

Ambition – Net Carbon Footprint

1 Net Carbon Footprint measured on an aggregate “well to wheel” or “well to wire” basis, from production through to consumption, on grams of CO2 equivalent per megajoule of energy products consumed; chemicals + lubricants products are excluded. Carbon Footprint of the energy system is modelled using Shell methodology aggregating lifecycle emissions of energy products on a fossil-equivalence basis. The methodology will be further reviewed and validated in collaboration with external experts 2 Potential society trajectory includes analysis from Shell scenarios estimate of Net Zero Emissions by 2070 and IEA Energy Technology Perspectives 2017; Potential illustrative Shell trajectory 3 Scope 1,2,3 emissions limited to activities associated with bringing energy products to the market, Scope 3 emissions only includes Category 11: Use of sold products

WtW gCO2e/MJ1

Ambition to reduce Net Carbon Footprint1 of our energy products by around 20% by 2035

 Covers full range of emissions from

energy products (Scope 1, 2 and 33)

 Additionally, includes emissions

produced by customers when they use the energy products we sell

 Drive strategy over time in step with

society

 5-year reviews  Reductions estimated based on our

expectation of societal trajectory to meet Paris goals

Ambition for Net Carbon Footprint1

Society trajectory2 Shell trajectory2

Shell “business as usual” In line with society by 2050 ~20% reduction by 2035

Ambitions:

 Reduce Net Carbon

Footprint1 of our energy products by ~20% by 2035

 Be in line with society

Net Carbon Footprint by 2050

Royal Dutch Shell May 22, 2018

Our Net Carbon Footprint ambition moves in line with society

 Shell cannot predict society and government

future actions

 Therefore: aligned to society’s progress  In step with society’s drive to align with Paris

goals

 Reassess progress every five years linked

to NDC1 process Shell’ s approach goes further than shareholder resolution requests

 We include emissions from:  (The production of) Shell’s energy products  Energy products from third parties,

processed in our facilities

 Energy products from third parties,

sold by us, and

 The use of these energy products  Potential business activities identified,

such as growing new energies business

Shareholder resolution – response

1 Nationally Determined Contributions 16

Shell’ s approach is wide-ranging and progressive

Royal Dutch Shell May 22, 2018

Power value chain

CUSTOMERS OPTIMISATION SUPPLY AND GENERATION

 Secure demand in key markets  Commercial, industrial, and

residential

 Optimise intermittent

demand and supply

 Trading opportunities  Wind, solar, and selected

gas and storage assets

 Selective capacity ownership

to create portfolio flexibility

Leverage portfolio flexibility and arbitrage opportunities Multiple parties are active on the demand side Not all products are supplied by Shell; some are purchased from third parties

17

 Adjacencies to

existing businesses

 Value chain

integrator

 Demand-driven

development

Royal Dutch Shell May 22, 2018

Leading through the energy transition with tangible actions

18

500 ultra-fast charge posts with IONITY in next 2 years Europe Hydrogen network development USA & Germany 20+ ‘recharge’ locations UK & The Netherlands Integrated charging solutions

Royal Dutch Shell May 22, 2018

Strategic ambition

Thrive in the energy transition World-class investment case Strong license to operate

2017

 Year of transformation  Strong financial delivery + strengthened financial framework  Growth momentum

19

Royal Dutch Shell May 22, 2018

OPL 245

Update for investors

www.shell.com/investors

20

Responsible investor briefing – April 16, 2018

April 16, 2018 Ben van Beurden, Chief Executive Officer, Hans Wijers, Non-Executive Director and Chair of the Corporate and Social Responsibility Committee, Harry Brekelmans, Projects & Technology Director, Donny Ching, Legal Director, and Maarten Wetselaar, Integrated Gas & New Energies Director, presented in London during the annual responsible investors briefing.

Slides from p presentation a at the responsible investor briefing in L London, , April 16 16, , 20 2018 18 (PDF, , 4 4 MB) Scripted speech t text from responsible investor b briefing in L London, , April 16 16, , 20 2018 18 (PDF, , 17 172 2 kB)

Royal Dutch Shell May 22, 2018

Royal Dutch Shell plc May 22, 2018

Annual General Meeting

2018

#makethefuture